"If Vaccine Introduction Is Delayed and Spread Increases, Economic Contraction Expected Next Year"

"Rapid Vaccine Procurement Is Key Over Optimistic Views on Quarantine Success... Transparency Needed in Procurement Status and Vaccination Plans"

[Asia Economy Reporter Ki-min Lee] As the introduction of the novel coronavirus infection (COVID-19) vaccine is delayed and the spread intensifies, claims have emerged that our economy could experience severe negative growth next year.

The Korea Economic Research Institute announced on the 29th that it derived such results by analyzing the impact on Gross Domestic Product (GDP) according to scenarios based on the timing of vaccine introduction in its report titled "Economic Impact Analysis of Delayed COVID-19 Vaccine Introduction."

Based on studies related to the infection reproduction number, the report set the daily average number of cases before vaccine introduction at 300, 1,200, 1,500, and 2,500 for the base scenario through scenario 3, respectively. The base scenario and scenario 1 assume vaccine introduction in the first quarter of next year, while scenarios 2 and 3 assume the second quarter of next year. Additionally, a model reflecting seven global regions and nine industries was constructed to empirically analyze economic growth rate forecasts.

In the optimistic base scenario, the economic growth rate is expected to rebound to 3.4% next year. However, if the situation worsens and daily new confirmed cases increase to the level of scenario 1, the growth rate is projected to be 0%. In scenarios 2 and 3, where vaccine administration is further delayed and confirmed cases surge, economic growth is estimated to contract by -2.7% to -8.3%. Furthermore, GDP is predicted to decrease by 3.8% to 20.5% next year depending on vaccine rollout and the spread of infections.

Analyzing additional GDP losses due to delayed vaccine introduction and increased confirmed cases in terms of rate of change and monetary value, the negative scenarios compared to the base scenario?with daily new confirmed cases around 300 and vaccine introduction in the first quarter?show additional losses of 4.5 to 16.7 percentage points, which translates to $76.4 billion to $285.2 billion.

Moreover, in scenarios 2 and 3, where vaccine introduction is delayed by one quarter compared to scenario 1, the additional GDP losses next year amount to $48.2 billion and $208.8 billion, respectively. The Korea Economic Research Institute explained that delayed vaccine introduction amid a severe increase in confirmed cases restricts economic activities of all economic agents, potentially causing fatal damage to the entire economic system.

In addition, analysis of the impact on exports and unemployment rates forecasts that exports in 2021 will decrease by 3.0% to 3.3%, and trade volume by 3.1% to 15.5%. While the unemployment rate is expected to increase by only 0.5 percentage points next year compared to this year under the base scenario, it is projected to surge by 21.7 percentage points under scenario 3.

The report argued that manufacturer selection based on price before vaccine efficacy is verified and limited vaccine contracts threaten the quarantine system and national economy, thus related laws should be revised. It also emphasized the need for prompt vaccine contract agreements without relying excessively on optimistic views of quarantine outcomes. Cho Kyung-yeop, head of the Economic Research Office at the Korea Economic Research Institute, stated, "This is a critical time when government efforts commensurate with the public's patience and efforts in quarantine are urgently needed," adding, "Trust from the public must be gained through transparent disclosure of vaccine procurement status and vaccination plans."

This content was produced with the assistance of AI translation services.